Creditor Banks Could Become Main Investors in Sorgenia

Monday, March 03, 2014

Reuters - Creditor banks could become majority investors in Italy's Sorgenia as the owners of the energy company took a step closer on Monday towards a deal on debt restructuring, three sources close to the matter said.

Sorgenia, for years the main asset of the De Benedetti family's holding group CIR, has run up debts of 1.8 billion euros ($2.48 billion) after buying modern gas-fired power plants which are now underused due to the economic crisis and the rise of renewable energy sources.

Creditor banks had been trying to get CIR to pay half of the 600 million euros of debt that must be cleared to keep the business afloat but the holding has offered 100 million euros.

The banks recently indicated they could be prepared to accept a cash injection in the region of 150 million euros in return for which they would convert debt into equity to the tune of 300 million euros.

"Progress was made this morning and the two sides drew a step closer even if there's still a way to go," one source said.

The source added a deal which saw creditors converting 300 million euros of debt into shares would leave them with around 67 percent stake in Sorgenia and CIR around 33 percent.

Representatives from Sorgenia and CIR met the banks on Monday morning to try to narrow the distance between them.

"It was a fairly positive result," a second source said, adding Sorgenia was scheduled to hold a board meeting on Wednesday.

A third source said it was still an ongoing process. "Everyone's talking about positions of the two sides converging. The structure of the deal is not a problem and we're almost there on how much CIR will put up. The real problem is the conversion of debt into equity instruments," the source said.

Sorgenia owes money to about 20 Italian and foreign banks. Its main creditor is the troubled Banca Monte dei Paschi di Siena while other creditors include Intesa Sanpaolo and UniCredit.

Austrian utility Verbund holds 46 percent of the energy company but has written off the value of the stake and said it is not ready to inject any more cash into the venture.

CIR, which is a major shareholder in leading Italian publisher L'Espresso, declined to comment. Monte Paschi, UniCredit and Intesa also declined to comment.